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The latest Hometrack UK Cities House Price Index reveals that city level house price growth had a robust start to 2017. Buyers shrugged off fears of Brexit and took advantage of record low mortgage rates in Q1 to buy homes in larger regional cities where affordability remains attractive. City level house prices grew 3.5 per cent in Q1 2017, the highest quarterly rate of price inflation for three years (May-2014).
The uplift in prices over the last three months has pushed the annual headline rate of growth for the Index to 6.4 per cent, up from 4.9 per cent in December 2016. The impetus for this higher rate of inflation is emanating from large regional cities such as Newcastle, Glasgow, Edinburgh and Manchester which registered above average price increases over the first quarter of 2017.
Manchester remains the fastest growing city with an annual growth rate of 8.8 per cent, followed by Birmingham at 8.0 per cent and then Bristol (7.3 per cent). Manchester, Birmingham and Newcastle are recording levels of house price increases not seen for 12 years (mid 2005).
In contrast, house price inflation in London continues to slow and has now reached 4.9 per cent year-on-year, which means the capital is among the five slowest growing cities along with Oxford and Cambridge (see Figure 1). This is the lowest rate of house price growth recorded in London for five years as affordability pressures impact demand for housing.
Attractive housing affordability together with record low mortgages rates and an improving economic outlook is supporting demand for housing in cities outside southern England. Underlying market conditions in regional cities such as Birmingham and Manchester appears healthy. The new supply of homes coming to market is only just keeping pace with demand, which is maintaining the upward pressure on house prices (see Figure 2).
Richard Donnell, Insight Director at Hometrack says: “Buyers outside the south of England appear to be shrugging off concerns over Brexit and a squeeze on real incomes to take advantage of low mortgage rates. This is shifting the dynamics of the housing market. Cities that have been driving house price growth over the last 2-3 years, such as London and Cambridge, are now seeing a significant slowdown while large regional cities continue to register robust and sustained levels of house price growth.